West Pharmaceutical Services, Inc. (WST)

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West Pharmaceutical Services, Inc. (WST)

Q3 2013 Earnings Conference Call

October 31, 2013 09:00 AM ET


Don Morel - Chairman and CEO

Bill Federici - Vice President and CFO

John Woolford - Investor Relations, Westwicke Partners


Arnie Ursaner - CJS Securities

Ross Taylor - CL King

Rafael Tejada - Bank of America Merrill Lynch



Good day and welcome to the West Pharmaceutical Services Third Quarter 2013 Result conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions). This call is being recorded on behalf of West and is copyrighted material. It cannot be rerecorded or rebroadcast without the company’s expressed permission. Your participation in this call implies your consent to our taping. If you have any objection, you may disconnect at this time.

And now I’d like to turn today’s meeting over to Mr. John Woolford from Westwicke Partners. Sir, you may begin.

John Woolford

Thank you, operator. Good morning everyone and welcome to West’s third quarter 2013 results conference call. We issued our financial results this morning and the release has been posted in the Investors section on the company’s website located at www.westpharma.com. If you have not received a copy of this announcement please call Westwicke Partners at 443-213-0500 and a copy will be sent to you immediately.

Posted on the company’s website is a slide presentation that management will refer to in their remarks today. The presentation is in PDF format. Should you require a link to a free download of software that will enable users to view the presentation, is also available on the website.

I remind you that statements made by management on this call and in the presentation will contain forward-looking statements within the meaning of U.S. Federal Securities law and that are based on management’s beliefs and assumptions, current expectations, estimates and forecasts. Many of the factors that will determine the company’s future results are beyond the ability of the company to control or predict. These statements are subject to known or unknown risks or uncertainties and therefore actual results could differ materially from past results and those expressed or implied in any forward-looking statement. For a non-exclusive list of factors which could cause actual results to differ from expectations, please refer to today’s press release, as well as any further disclosures the company makes on related subjects in the company’s 10-K, 10-Q, and 8-K reports.

In addition, during today’s call, management may make reference to non-GAAP financial measures including adjusting operating profit and adjusted diluted EPS. Reconciliations and limitations of the non-GAAP financial measures to the most comparable financial results prepared in conformity to GAAP are provided in materials accompanying this morning’s earnings release.

At this time, I’d like to turn the call over to Don Morel, West’s Chairman and CEO. Don?

Don Morel

Thank you, John and good morning everyone. Welcome to West third quarter earnings call. Joining me today are Bill Federici, West’s Chief Financial Officer and Mike Anderson our Treasurer and Primary Investor Relations contact. This morning Bill and I will be discussing our operating performance for the past three months and their outlook for the remainder of the year. We will also provide a preliminary revenue guidance for 2014 and our update for our five year planning objectives for the business.

As in past calls, we will referring a PowerPoint slide deck to support our remarks, which can be accessed via our website under Investor. However, if you cannot access the file, the information in the slides is covered in both this morning’s release and our prepared remarks.

West had a very strong third quarter as summarized on slide 3 and 4. Beginning with slide 3, which was highlights in the quarter. Revenues were up strongly versus 2012 driven by high value product sales and Pharmaceutical Packaging. The favorable product mix resulted in a one percentage point improvement in our gross margin, which when combined with contributions from our lean initiatives and SG&A control yielded a more than 40% increase in adjusted operating profit. And as was announced in our August call, the two-for-one stocks were approved by the Board was distributed the shareholders September 26.

Turning to slide number 4. Consolidated sales increased 10.9% to just over $341 million excluding currency effects and our consolidated gross margin increased to 30.8%. Adjusted operating profits improved by $11.8 million to $39.7 million and adjusted earnings per share were $0.39 versus $0.26 on a split adjusted basis. Overall it was a very strong quarter for the company.

Additional segment details are provided on slide number 5. Sales in the Packaging Systems segment grew by 14.7% and Delivery Systems grew by 1.7%, again excluding the effects of currency. Pharmaceutical Packaging Sales benefited from a very positive sales mix generated by substantially higher sales of Westar and FluroTec products, especially in markets outside the U.S. and strong Asia-Pacific demand. Sales of high value products increased over 23% versus the prior year period and rebounded from the 3.3% gain in the second quarter of this year.

Delivery Systems sales grew modestly driven by a 12% increase in sales of CZ cartridges and vials. In our contract manufacturing operations Europe demand continue to be strong for insulin delivery system, while North America was softer as a result of regulatory delays with two key start-up programs. We expect both of these programs to ramp up in the first half of 2014.

Read the rest of this transcript for free on seekingalpha.com